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| Exit plan | Evidence to examine | Stress test |
|---|---|---|
| Sale of property or another asset | Sale status, expected net proceeds and settlement conditions | A lower price or delayed settlement. |
| Longer-term refinance | Prospective lender criteria and conditions still outstanding | A lower valuation, weaker income or a declined application. |
| A known business receipt | Contract, debtor reliability and payment timing | A dispute or late payment. |
| Project completion then sale | Remaining work, approvals and selling costs | Cost overruns and a longer marketing period. |
Compare the net advance with the amount owed
Establishment, valuation, legal and broker charges may be paid upfront or deducted from funds. Interest may be paid during the term, retained at the outset or added to the balance. Ask for a cash schedule showing exactly what reaches you and what is owed at each stage.
A quoted monthly rate is not an all-in annual cost. Include minimum interest periods, discharge fees and any extension or default charges when comparing offers over the same expected term.
Write the bridge as a dated cash gap
Identify the payment that must be made now, the receipt expected later and the time between them. A bridge for an agreed purchase awaiting another settlement is different from money needed to cover trading losses with no defined recovery date. The amount and term should come from that specific gap.
Put all unavoidable payments on the same timeline. A property purchase may require a deposit before the new facility settles. Legal and valuation work may also need funding in advance. Confirm which costs the facility can meet and which must come from existing cash.
Where the exit is a business receipt, allow for the work still needed to earn it. An invoice due in 60 days is not equivalent to a contract that will only be invoiced after a project is completed. Include delivery costs, acceptance conditions and the customer's normal payment behaviour.
Understand retained interest through a cash example
Suppose an illustrative $200,000 facility has $12,000 of interest retained upfront and $6,000 of deducted fees. Only $182,000 reaches the borrower, although the stated facility is $200,000. Ask the lender to show the debt and payout at the expected exit, including how unused retained interest is treated if repayment occurs early.
With interest added to the balance instead, the cash initially available may be different but the debt grows while the bridge remains open. With serviced interest, the business needs regular cash for payments. Compare these structures using both usable funds and the exit balance; the same advertised limit does not make them equivalent.
Allow for the delay you can survive
For illustration, if keeping a facility open costs $4,000 each additional month, a three-month delay adds $12,000 before any extension fee. Use the actual quote and ask whether an extension is discretionary rather than assuming it will be granted.
Also check the remaining room under the facility limit. Interest added to the balance can reduce available headroom as time passes.
Security and lender priority matter
Bridging arrangements often involve property or other security. Existing mortgages, the new lender's priority and any required consents affect the transaction. A caveat and a registered mortgage are not interchangeable descriptions of the legal rights involved.
Have the documents reviewed for enforcement, guarantees and maturity obligations. Business-purpose borrowing does not automatically carry the same protections as a consumer home loan, and there is no universal default notice period for every commercial arrangement.
Prepare the exit before the facility is drawn
For a refinance exit, obtain a realistic view of the next lender's requirements before signing the bridge. Identify any accounts, leases, valuations or approvals that will be needed and when they can be produced. Ask what happens if the bridge lender's valuation is not accepted by the replacement lender.
For a sale, use proceeds after the first mortgage, transaction costs and other required payments. A gross sale estimate can look comfortably above the bridge balance while leaving too little cash to repay it. Test the price at which the plan stops working, not only the price hoped for.
Diary the latest practical start date for the exit process. A refinance application begun a week before maturity may leave no room to address missing evidence or a lower valuation. Ask how extensions are requested, what fees or conditions apply and whether the lender can decline.
Compare the cost of bridging with changing the transaction
A negotiated settlement date, smaller purchase or staged project may reduce the funding gap. Each alternative can have a price: a seller may require a different offer or a delayed project may lose income. Compare those actual costs with the bridge and its delay case.
If the transaction only works with the most optimistic sale price and immediate settlement, the issue may be the transaction's margin rather than the availability of a short-term lender. Having property security does not create a reliable exit.
Give the exit a date, evidence and a fallback
A planned sale is more useful to assess when the property is on the market, costs are budgeted and the expected net proceeds are clear. A proposed refinance needs its own repayment and valuation case. Neither becomes certain because it is written into a bridging application.
For a business receipt, identify the contract, any conditions before payment and the customer's payment record. Then decide what you would do if it is disputed or late. A fallback has to be available in practice; another unapproved loan simply moves the uncertainty.
Compare a standard facility if it can meet the deadline. Bridging is worth considering for a short, evidenced mismatch where the business can carry a realistic delay. It is much harder to justify where the only exit is that trading will somehow improve before maturity.
Nine months on a $1 million bridge: an illustrative $110,000 cost
Assume $1 million outstanding throughout a nine-month term at 12% p.a. simple interest, plus an establishment fee of 2% of the principal. Interest is $1,000,000 × 12% × 9 ÷ 12 = $90,000; the fee is $20,000. Together they cost $110,000 before legal, valuation, broker or other charges. These are SMB Loan assumptions, not a typical-rate claim or an available offer.
If the same interest rate continues for a further three months with no principal reduction, interest adds another $30,000. An extension or default charge could add more. Where interest is deducted upfront or added to the loan balance, both the net advance and the cost change; ask for a dated payout schedule under the actual agreement.